Gates Sr., Gorton spar over income tax

TACOMA – The supporting players locked horns like bighorn sheep at Monday night’s debate on Initiative 1098, while two elder statesmen – Bill Gates Sr. and ex-Sen. Slade Gorton – came across as a pair of formidable but affable Saint Bernards.

The faceoff was over a plan that offers lower state property taxes, and Business & Occupation Tax relief for small business, while instituting an income tax on individuals earning more than $200,000 and couples making more than $400,000.

Supporters argued that the wealthy should pay their fair share, and that Washington schools desperately need the money. Opponents said I-1098 would stifle investment and encourage reckless behavior by the state’s political class.

The Washington State Legislature would look on an income tax as “a bonanza they have never seen and they will go wild,” Gorton, who opposes I-1098, predicted. He argued, using Connecticut as an example, that the income tax will be extended to cover not only the wealthy but the middle class.

Matt McIlwain of Madrona Venture Group, predicted that the income tax will discourage entrepreneurs from making investments and crimp the state’s economic growth. “This income tax is not about the wealthy: It is about the future of the state of Washington,” McIlwain argued.

Nick Hanauer, a Seattle venture capitalist and I-1098 booster, scoffed at the claim business will resettle in states with no income tax.

“No reasonable technology company is going to move from Washington to South Dakota because of an income tax,” said Hanauer. Neither will any venture capital firm like Madrona.
“There’s no there there,” Hanauer said of South Dakota.

The elder Gates argued that Washington has plunged in its commitment to education. In investment per $1,000 of income, the state has fallen from 24th of the 50 states in 1991-2 to 46th in 2005-6. In per pupil expenditures, the state has fallen from 17th to 37th.

The tax plan would generate more than $2 billion in annual income: 70 percent of it would go to education, 30 percent to state health care.

“It makes all kinds of sense to have a modest income tax on the most wealthy among us to improve education,” said Gates, who has sat on a dunking stool in a TV spot promoting I-1098.

The father of Microsoft’s co-founder argued that the lowest 20 percent of Washington residents pay 17 percent of their income to support state services, while high income earners pay just 2.6 percent.

“They have been riding free on the payment of other people for year after year,” said Gates.

He may be losing the argument. A new statewide Elway Poll shows support for I-
1098 slipping, with 41 percent in favor and 48 percent opposed. The state’s largest newspaper, The Seattle Times – which supported income tax proposals in the 1970’s –
has pummeled I-1098 in editorial after editorial.

But it was the Hanauer -McIlwain faceoff that most entertained the packed house that showed up for last night’s debate at the University of Washington-Tacoma.

The critics ignore a few facts, he argued. Private schools spend $18,000 per student per year. “Shrilly” critics overlook the fact that Seattle schools must find a way to educate special needs students with autism and Down syndrome, and students speaking a multiplicity of native tongues.

The opponents of Initiative 1098 did not offer any alternative to meet the state constitutional requirement that schools be fully funded.

Gorton did argue that the state will get more revenue with the tax system it has. “It (I-1098) will cause incomes to increase much less rapidly than they did in the past,” argued the former three-term senator.

As he flashed a list of corporate I-1098 foes on the screen, McIlwain argued: “We’re not saying no income tax ever. We are saying not this tax.”

Hanauer fired back, saying: “To oppose Initiative 1098 is to say it is fair for somebody like me to pay two-thirds of one percent of my income to the (state’s) public good while you (middle class) pay 10 to 11 percent.”

Gates, a longtime University of Washington regent, lamented “what’s happening to our universities” in the current state budget crunch. Hanauer reinforced the argument, saying healthy schools and health care help make up a climate conducive to business.

“We are all in this together and the public sphere creates opportunities in the private sphere, and vice versa,” said Hanauer.

Gorton showed, in his closing statement, that he still has a talent for the
rapier comeback.

Gates, Sr., had lamented conditions in Oregon – a state with an income tax, but no sales tax – whose universities have fallen on even harder times than those north of the Columbia River.

“As soon as this campaign is over,” Gorton retorted, “We’ll have to send Bill down to Oregon to campaign for a sales tax.”